FTC Aims to Block Proposed Hospital Merger Between Utah Facilities

June 03, 2022 - The Federal Trade Commission (FTC) has authorized a lawsuit to block the proposed hospital merger between HCA Healthcare and Steward Health Care System, alleging that the transaction would increase healthcare costs and diminish care quality for patients in  Utah.

“As the second and fourth largest healthcare systems in the Wasatch Front region of Utah, which surrounds Salt Lake City, HCA Healthcare and Steward Health Care System help to keep costs down for consumers by competing vigorously with each other,” Holly Vedova, director of the FTC Bureau of Competition, said in the press release.

“The result is lower prices and more innovative services for patients and their families. If these companies merge, this competition will be lost, and Steward will no longer be available to patients as a low-cost provider in this region.”

Both healthcare companies offer inpatient general acute care services to around 80 percent of Utah’s population. In addition, Nashville, Tennessee-based HCA Healthcare operates 182 hospitals across the country and abroad. Steward Health Care System is headquartered in Dallas, Texas, and runs 41 hospitals in the US and abroad.

HCA Healthcare announced plans to acquire Steward Health Care System’s five Utah hospitals in September 2021.

Due to the proximity of their Utah locations, the health systems compete with one another for inclusion in insurer networks, healthcare quality, services lines, and physician recruitment. If the proposed merger were to be finalized, Utah residents may suffer from the lack of competition.

The administrative complaint also alleges that the merger would reduce the number of healthcare systems offering inpatient general acute care hospital services. For example, in some Utah markets, the number of health systems would fall from three competitors to two, the press release noted.

Additionally, the complaint noted that the proposed merger may significantly increase market concentration levels in an already concentrated market.

The transaction would also eliminate Steward Health Care System as a low-cost competitor, allowing HCA Healthcare to raise its reimbursement rates, FTC said. Commercial payers will likely pass on a portion of the higher costs to employers and health plan members through increased premiums, deductibles, co-pays, and other out-of-pocket expenses.

The administrative complaint will be filed in the US District Court for the District of Utah, with a trial scheduled to begin on December 13, 2022.

FTC recently took legal action to block another proposed merger between New Jersey-based Saint Peter’s Healthcare System and RWJBarnabas Health. RWJ had planned to acquire Saint Peter’s, but FTC alleged that the transaction would harm competition in Middlesex County, New Jersey.

Similar to HCA Healthcare and Steward Health Care System, RWJ and Saint Peter’s are direct competitors, and competition helps improve care quality, access to care, and service offerings, FTC said.

The proposed deal would likely increase market concentration and allow the combined health system to increase reimbursement rates, according to the administrative complaint.

The trial for the complaint is scheduled to start on November 29, 2022, in the US District Court for the District of New Jersey.

Anticompetitive repercussions are frequently the reason antitrust agencies block healthcare mergers. However, hospital groups have urged FTC and the Department of Justice to consider other aspects when evaluating merger transactions, such as the quality of care improvements that may result from deals.

Most research has shown that hospital mergers do not impact quality of care, but some transactions contradict this notion. For example, rural hospital mergers were associated with better patient outcomes compared to hospitals that remained independent.